Ryan Avent has a post where he notes research results from the New York Fed:
THE datasphere is bursting with inflation indexes (inflation inflation?). The Bureau of Labour Statistics provides consumer and producer prices while the Bureau of Economic Analysis gives us all manner of deflators. There are headline and core series (the latter stripping out especially volatile prices). One can look at price indexes for personal consumption expenditures (PCE), core PCE, “market-based” PCE, and core market-based PCE. There are chained indexes. The Cleveland Fed computes up median and “16% trimmed-mean” CPI.
These different indexes provide a check on each other, and are often good at highlighting particular sorts of trends in the data. And new research by economists at the New York Fed suggests another way of chopping up inflation figures that looks especially informative. As it turns out, goods prices and services prices tend to behave very differently, with important implications for macroeconomic policy.
The conclusion:
I like this way of digging into CPI data. But I also think it mostly reinforces the point that what monetary policy is really interested in is the labour-market output gap and its relation to wage growth. The prices for “stuff” don’t matter, and we don’t care if factories or stores close so long as everyone who wants to work can. The goods-services distinction is useful in that it shows us once again that on that basis the Fed has done far too little.
That sounds right. As the charts show for the last two cycles, when monetary policy was ‘correct’, NGDP moved towards trend and employment ‘thrived’, as in 2003-05 following the adoption of ‘forward guidance’.
For the present cycle we are led to make some adjustments. Since the monetary error was large (and persistent) we can assume (and the employment data indicate) there was some permanent ‘damage’ to the economy´s spending level and growth rate. But even with those adjustments the indication of a “labor-market output gap” is clear.
Bottom line: The adoption of an NGDP target level followed by a monetary policy that keeps spending on trend, is the ‘optimal’ solution. Insisting on targeting something elusive and poorly defined as ‘inflation’ is a recipe for … (choose your qualifier).
Historinhas 